NBT BANCORP INC (Form: 10-Q, Received: 05/10/2017 16:28:50)

Declines in the fair value of HTM and AFS securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses or in other comprehensive income. Depending on whether the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment (“ OTTI ”) shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the OTTI shall be separated into (a) the amount representing the credit loss and (b) the amount related to all other factors. The amount of the total OTTI related to the credit loss shall be recognized in earnings. The amount of the total OTTI related to other factors shall be recognized in other comprehensive income, net of applicable taxes.

In estimating OTTI losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the historical and implied volatility of the fair value of the security.

Management has the intent to hold the securities classified as HTM until they mature, at which time it is believed the Company will receive full value for the securities. The unrealized losses on HTM debt securities are due to increases in market interest rates over yields available at the time the underlying securities were purchased. When necessary, the Company has performed a discounted cash flow analysis to determine whether or not it will receive the contractual principal and interest on certain securities. The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline.

Management also has the intent to hold and will not be required to sell, the securities classified as AFS for a period of time sufficient for a recovery of cost, which may be until maturity. The unrealized losses on AFS debt securities are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. When necessary, the Company has performed a discounted cash flow analysis to determine whether or not it will receive the contractual principal and interest on certain securities. The unrealized losses on equity securities are due to declines in the fair value below the cost basis of the securities. For AFS debt and equity securities, the Company considers a decline in fair value to be other-than-temporary if it is probable that the Company will not recover its cost basis. For equity securities, OTTI losses are recognized in earnings if the Company intends to sell the security. In other cases the Company considers the relevant factors noted above, as well as the Company’s intent and ability to retain its investment for a period of time sufficient to allow for any anticipated recovery in market value, and whether evidence exists to support a realizable value equal to or greater than the cost basis. Any impairment loss on an equity security is equal to the full difference between the cost basis and the fair value of the security.

As of March 31, 2017 and December 31, 2016, management believes the impairments detailed in the table above are temporary . For the quarter ended March 31, 2017, $1.3 million of an OTTI loss on an equity investment was realized in the Company’s consolidated statements of income . There were no OTTI losses realized in the Company’s consolidated statements of income for the quarter ended December 31, 2016 .

Interest Rate Swaps

The Company enters into interest rate swaps to facilitate customer transactions and meet their financing needs. These swaps are considered derivatives, but are not designated in hedging relationships. These instruments have interest rate and credit risk associated with them. To mitigate the interest rate risk, the Company enters into offsetting interest rate swaps with counterparties. The counterparty swaps are also considered derivatives and are also not designated in hedging relationships. Interest rate swaps are recorded within other assets or other liabilities on the consolidated balance sheet at their estimated fair value. Changes to the fair value of assets and liabilities arising from these derivatives are included, net, in other operating income in the consolidated statement of income. At March 31, 2017 the notional amount of these customer derivative agreement and the offsetting derivative counterparty positions each totaled $394.9 million and the fair values included in other assets and other liabilities on the consolidated balance sheet applicable to these agreements amounted to $0.7 million. At December 31, 2016, the notional amount of these customer derivative agreements and the offsetting derivative counterparty positions each totaled $371.1 million. At December 31, 2016, fair values included in other assets and other liabilities on the consolidated balance sheet applicable to these agreements amounted to $0.3 million.

In 2016, the Company entered into interest rate swaps to modify the interest rate characteristics of certain short-term FHLB advances from variable rate to fixed rate in order to reduce the impact of changes in future cash flows due to market interest rate changes. These agreements are designated as cash flow hedges. The notional amount of these interest rate derivative agreements total $250.0 million at March 31, 2017 and December 31, 2016. Fair values included in other assets on the consolidated balance sheet applicable to these agreements amounted to $3.2 million at March 31, 2017 and $2.7 million at December 31, 2016.

9.	Commitments and Contingencies

The Company is a party to financial instruments in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuating interest rates. These financial instruments include commitments to extend credit, unused lines of credit, and standby letters of credit. Exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit origination guidelines, portfolio maintenance and management procedures as other credit and off-balance sheet products. Commitments to extend credit and unused lines of credit totaled $1.5 billion at March 31, 2017 and $1.5 billion at December 31, 2016. Since commitments to extend credit and unused lines of credit may expire without being fully drawn upon, this amount does not necessarily represent future cash commitments. Collateral obtained upon exercise of the commitment is determined using management’s credit evaluation of the borrower and may include accounts receivable, inventory, property, land and other items.

The Company guarantees the obligations or performance of customers by issuing standby letters of credit to third parties. These standby letters of credit are frequently issued in support of third party debt, such as corporate debt issuances, industrial revenue bonds and municipal securities. The credit risk involved in issuing standby letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers, and they are subject to the same credit origination guidelines, portfolio maintenance and management procedures as other credit and off-balance sheet products. Typically, these instruments have terms of five years or less and expire unused; therefore, the total amounts do not necessarily represent future cash commitments. Standby letters of credit totaled $48.9 million at March 31, 2017 and $36.8 million at December 31, 2016. As of March 31, 2017, the fair value of standby letters of credit was not significant to the Company’s consolidated financial statements.

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10.	Recent Accounting Pronouncements

Recently Adopted Accounting Standards

Effective January 1, 2017, the Company adopted the prevision of Accounting Standards Update (“ASU”) No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . ASU 2016-09 requires several revisions to equity compensation accounting. Under the new guidance all excess tax benefits and deficiencies that occur when an award vests, is exercised, or expires are recognized in income tax expense as discrete period items. Previously, these transactions were typically recorded directly within equity. Consistent with this change, excess tax benefits and deficiencies are no longer included within estimated proceeds when performing the treasury stock method for calculating diluted earnings per share. Excess tax benefits are also recognized at the time an award is exercised or vests compared to the previous requirements to delay recognition until the deduction reduces taxes payable. The presentation of excess tax benefits in the statement of cash flows shifted to an operating activity from the prior classification as a financing activity. ASU 2016-09 also provides an accounting policy election to recognize forfeitures of awards as they occur when estimating stock-based compensation expense rather than the previous requirement to estimate forfeitures from inception. Further, ASU 2016-09 permits employers to use a net-settlement feature to withhold taxes on equity compensation awards up to the maximum statutory tax rate without affecting the equity classification of the award.

Transition to the new guidance was accomplished through a combination of cumulative-effect adjustment to equity (forfeitures) and prospective methodologies (cash flows, tax windfalls and shortfalls). The actual effects of adoption in 2017 will primarily depend upon the share price of the common stock, which affects the vesting of certain performance awards, probability of exercise of certain stock options and the magnitude of windfalls for all awards upon either vesting or exercise. The effect on earnings per share calculations and election to account for forfeitures as incurred have not been significant.

Accounting Standards Issued Not Yet Adopted

In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic310-20) . ASU 2017-08 requires amortization of premiums to the earliest call date on debt securities with call features that are explicit, on contingent and callable at fixed prices on present dates. The ASU does not impact securities held at a discount; the discount continues to be amortized to the contractual maturity. The guidance is required to be applied with a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. ASU 2017-08 is effective for the Company on January 1, 2019. Early adoption is permitted. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In March 2017, the FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715) . ASU 2017-07 requires the service cost component of net periodic pension and postretirement benefit cost to be reported separately in the consolidated statements of income from the other components. Additionally, the amendments in the ASU require presentation of the service cost component in the consolidated statements of income in the same line item as other employee compensation costs and presentation of the other components in a different line item from the service cost component. The amendments in this ASU are required to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on or after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets with a practical expedient allowed for prior comparative period presentation permitted.. ASU 2017-07 is effective for the Company on January 1, 2018. Early adoption is permitted. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In February 2017, the FASB issued ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) . ASU 2017-05 will clarify the scope of Subtopic 610-20 and add guidance for partial sales of nonfinancial assets. The amendments define the term in substance nonfinancial assets, and clarify that a nonfinancial asset within the scope may include nonfinancial assets transferred within a legal entity to a counterparty, in part, as a financial asset promised to a counterparty in a contract. Additionally, the amendments in ASU clarify that an entity should identify each distinct nonfinancial asset or in substance nonfinancial assets and allocate consideration to each distinct asset. The amendments should be applied either on retrospectively to each period presented or with a modified retrospective approach. ASU 2017-05 is effective for the Company on January 1, 2018 and the Company is required to apply the amendment at the same time that is applies the amendments in 2014-09. Early adoption is permitted but only as of annual reporting period beginning after December 15, 2016. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

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In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . ASU 2017-04 will amend and simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitative impairment test is necessary. The amendments should be applied on a prospective basis. The nature of and reason for the change in accounting principle should be disclosed upon transition. ASU 2017-04 is effective for the Company on January 1, 2020. Early adoption is permitted on testing dates after January 1, 2017. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business . ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities (“set”) is a business and to address stakeholder feedback that the definition of a business in current GAAP is applied too broadly. The primary amendments in the ASU provide a screen to exclude transactions where substantially all of the fair value of the transferred set is concentrated in a single asset, or group of similar assets, from being evaluated as a business. ASU 2017-01 is effective for the Company on January 1, 2018 using the prospective method. Early adoption is permitted. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . ASU 2016-18 address diversity in practice from entities classifying and presenting transfers between cash and restricted cash as operating, investing, or financing activities, or as a combination of those activities in the Statement of Cash Flows. The ASU requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the Statement of Cash Flows. As a result, transfers between such categories will no longer be presented in the Statement of Cash Flows. ASU 2016-18 is effective for the Company on January 1, 2018 using the retrospective method. Early adoption is permitted provided that all amendments are adopted in the same period. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments) . ASU 2016-15 addresses diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This standard addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for the Company on January 1, 2018. Early adoption is permitted, including adoption in an interim period. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-16 amends the accounting for credit losses on available for sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for the Company on January 1, 2020. Early adoption is permitted for all organizations for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . ASU 2016-02 requires lessees to recognize right of use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize a right of use asset and lease liability. Additionally, when measuring assets and liabilities arising from a lease, optional payments should be included only if the lessee is reasonable certain to exercise an option to extend the lease, exercise a purchase option or not exercise an option to terminate the lease. ASU 2016-02 is effective for the Company on January 1, 2019. Early adoption is permitted in any interim or annual period. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities . ASU 2016-01 addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments and requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value. Any changes in fair value will be recognized in net income unless the investments qualify for a new practicability exception. This ASU also requires entities to recognize changes in instrument-specific credit risk related to financial liabilities measured under the fair value option in other comprehensive income. No changes were made to the guidance for classifying and measuring investments in debt securities and loans. ASU 2016-01 is effective for the Company on January 1, 2018. Early adoption is permitted in any interim or annual period. Management is evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU No. 2014-09 - Revenue from Contracts with Customers (Topic 606) . ASU 2014-09 is a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP and is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects consideration to which the entity expects to be entitled in exchange for those goods and services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. ASU 2014-09 was initially effective for the Company on January 1, 2017; however, in August 2015, the FASB issued ASU No. 2015-14 - Revenue from Contracts with Customers - Deferral of the Effective Date , which deferred the effective date to January 1, 2018. Early adoption is not permitted. In addition, the FASB has begun to issue targeted updates to clarify specific implementation issues of ASU 2014-09. These updates include ASU No. 2016-08 - Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU No. 2016-10 - Identifying Performance Obligations and Licensing, ASU No. 2016-12 - Narrow-Scope Improvements and Practical Expedients, and ASU No. 2016-20 - Technical Corrections and Improvements to Top 606 - Revenue from Contract with Customers . The adoption of these ASUs will be required using one of two retrospective application methods beginning with the Company's Quarterly Report on Form 10-Q for the quarter ending March 31, 2018. The Company plans to apply the modified retrospective method with a cumulative-effect adjustment to opening retained earnings. Management is currently evaluating the potential impact of this guidance on our consolidated financial statements. In evaluating this standard, management has determined that the majority of revenue earned by the Company is from revenue streams not included in the scope of this standard and therefore management does not expect the adoption of the new revenue recognition guidance to have a material impact on our consolidated financial statements.

Split‑Dollar Agreement

THIS AGREEMENT (the “Agreement”) is made and entered into as of the 9th day of May, 2017 by and among NBT BANCORP INC., a Delaware corporation, and NBT BANK, N.A., a national banking association organized under the laws of the United States (collectively, the “Bank”), and John H. Watt Jr.

WHEREAS, John H. Watt Jr. (the “Employee”) is employed by the Bank as its president and chief executive officer;

WHEREAS, the Employee wishes to provide additional life insurance protection for his family in the event of his death;

WHEREAS, the Bank is willing to allocate a portion of the death proceeds of a life insurance policy or policies (“Policy”) of the Employee’s life to the Employee’s beneficiary(ies) if the Employee dies while actively employed by the Bank or a Director of the Bank;

WHERAS, the Bank is willing pay any premiums due on the Policy;

WHEREAS, the Bank and the Employee have agreed to make the Policy subject to this Agreement; and

WHEREAS, it is understood and agreed that this Agreement is to be effective as of the date of this Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual promises contained herein, the parties hereto agree as follows:

1. Insurance Policy .

The Bank is the sole owner of the Policy and shall have the right to exercise all incidents of ownership. The sole purpose of this Agreement is to provide a death benefit payable on the death of the Employee during the term of this Agreement. The parties agree that the Policy shall be subject to the terms of this Agreement and of the endorsement to the Policy filed with the Insurer to implement the provisions of this Agreement. The Bank may exercise all ownership rights granted to the owner of the Policy by the terms thereof, except as otherwise provided in this Agreement. If the Employee should die while employed by the Bank, he shall be the direct beneficiary of death proceeds equal to the lesser of (i) the dollar amount specified on Exhibit A hereto and (ii) the difference in the death benefit payable by the insurance carrier and the cash surrender value of the Policy (the “Net Amount at Risk”) with the Bank entitled to all other proceeds. If the Employee is a member of the Board of the Bank but no longer an employee of the Bank at the time of his death, he shall be the direct beneficiary of death proceeds equal to the lesser of (i) $500,000 and (ii) the Net Amount at Risk with the Bank entitled to all other proceeds. The amount to which the Bank is entitled in either event is referred to herein as the “Bank’s Interest in the Policy.” The Bank will keep possession of the Policy. The Bank agrees to make the Policy available at reasonable times to the insured for the purpose of endorsing or filing any change of beneficiary on the Policy for the portion of the death proceeds that is unrelated to the Bank’s Interest in the Policy, but the Policy shall thereafter be promptly returned to the Bank. Any indebtedness on the Policy will be deducted from the proceeds payable to the Bank. Also, any collateral assignment made by the Bank will be deducted from the proceeds payable to it.

2. Election of Settlement Option and Beneficiary . By notice to the Bank, the Employee may select the settlement option for payment of, and the beneficiary or beneficiaries to receive, the portion of the death benefit provided under the Policy other than the Bank’s Interest in the Policy. Upon receipt of such notice, the Bank shall execute and deliver to the Insurer the forms necessary to elect the requested settlement option and to designate the requested person, persons or entity as the beneficiary or beneficiaries to receive such portion of the death proceeds of the Policy. The Bank and the Employee hereby agree to take all actions necessary to cause the beneficiary designation and settlement election provisions of the Policy to conform to the provisions hereof. The Bank shall not terminate, alter or amend such designation or election without the express written consent of the Employee.

3. Policy Dividends . Any dividend declared on the Policy shall be either applied to reduce the premium payments on the Policy agreed to be paid by the Bank pursuant to Section 4 herein or to purchase paid up additions to the Policy, at the discretion of the Bank.

4. Payment of Premiums . The Bank shall pay a sufficient amount of premiums to the Insurer to maintain the Policy in force, and shall, upon request, provide evidence to the Employee that the Policy remains in force. The Bank shall annually furnish the Employee a statement of the amount of income reportable by the Employee for federal and state income tax purposes, as a result of the insurance protection provided on the Employee’s life.

5. Limitation on the Bank’s Rights in the Policy. The Employee will have rights set out in Section 2 hereof with respect to the death benefit provided under the Policy for the benefit of the Employee’s beneficiary or beneficiaries other than the Bank’s Interest in the Policy. The Bank shall not sell, surrender, change the insured or assign or transfer ownership of the Policy except after termination of the Agreement pursuant to Section 6 hereof; other than for the purpose of obtaining a loan against the Policy. The aggregate amount of such loans, together with the unpaid interest accrued thereon, will at no time exceed the lesser of (a) the Bank’s Interest in the Policy or (b) the loan value of the Policy as determined by the Insurer. The Bank will not take any action dealing with the Insurer that would impair any right or interest that the Employee has in the Policy. Without limiting the foregoing, following termination of this Agreement, to the extent permitted by the Policy, the Bank may designate any officer or other employee of the Bank as the insured under the Policy and may continue this Agreement with such officer or employee; provided, however, pursuant to this Agreement the Bank cannot assign, transfer, convey or sell the Policy to the Employee or any agent of the Employee for the Employee’s behalf. The exercise by the Bank of the right to surrender the policy or to change the insured will terminate the rights of the Employee in the Policy.

6. Termination of the Agreement During the Employee’s Lifetime.

(a) This Agreement may be terminated at any time while the Employee is living by a written instrument signed by the Bank and the Trustee.

(b) The Bank may unilaterally terminate this Agreement while the Employee is living by written notice to the Employee at any time after the Employee has ceased to be (i) both the President and Chief Executive Officer of the Bank and (ii) a member of the Board of the Bank, subject to subsection 6(c), below.

(c) The terms of subsection 6(b), above, notwithstanding, if the cessation of the Employee’s employment as President and/or Chief Executive Officer of the Bank or Employee’s Board membership is due to disability (as defined pursuant to the Bank’s Long-Term Disability Plan), the Bank may not unilaterally terminate this agreement, but this Agreement shall continue in force until the earliest to occur of the following: (i) Employee reaching age 72, (ii) the Employee electing to receive his qualified retirement plan benefits or (iii) his ineligibility for benefits under the Bank’s Long-Term Disability Plan. If at the occurrence of the first of these events the Employee is eligible to begin receiving benefits hereunder, this Agreement will continue and the Employee shall then receive benefits in accordance with the terms of this Plan. If, on the other hand, the Employee is not otherwise eligible to receive benefits hereunder, this Agreement shall terminate at that time unless the Employee thereupon returns to employment as the President and Chief Executive Officer of the Bank or as a member of the Board of Directors of the Bank, which shall continue the Agreement in full force.

(d) In any event, upon termination of this Agreement pursuant to this Section 6, the Bank cannot assign, transfer, convey or sell the Policy to the Employee or any agent of the Employee for the Employee’s behalf.

7. Insurer Not a Party.

The Insurer shall be fully discharged from its obligations under the Policy by payment of the Policy death benefit to the beneficiary or beneficiaries named in the Policy, subject to the terms and conditions of the Policy. In no event shall the Insurer be considered a party to this Agreement, or any modification or amendment hereof. No provision of this Agreement, nor of any modification or amendment hereof, shall in any way be construed as enlarging, changing, varying, or in any other way affecting the obligations of the Insurer as expressly provided in the Policy, except insofar as the provisions hereof are made a part of the Policy by the beneficiary designation executed by the Bank and filed with the Insurer in connection herewith. The Insurer shall not be obligated to inquire as to the distribution of any monies payable or paid by it under the Policy on the Employee’s life pursuant to the terms of this Agreement.

8. Named Fiduciary, Determination of Benefits, Claims Procedure and Administration .

(a) The Bank is hereby designated as the named fiduciary under this Agreement. The named fiduciary shall have authority to control and manage the operation and administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of this Agreement.

(b) (1) Claim

A person who believes that he or she is being denied a benefit to which he or she is entitled under this Agreement (hereinafter referred to as a “Claimant”) may file a written request for such benefit with the Bank, setting forth his or her claim. The request must be addressed to the general counsel of the Bank at its then principal place of business.

(2) Claim Decision.

Upon receipt of a claim, the Bank shall advise the Claimant that a reply will be forthcoming within 90 days and shall, in fact, deliver such reply within such period. The Bank may, however, extend the reply period for an additional 90 days for reasonable cause.

If the claim is denied in whole or in part, the Bank shall adopt a written opinion, using language calculated to be understood by the Claimant, setting forth: (a) the specific reason or reasons for such denial; (b) the specific reference to pertinent provisions of this Agreement on which such denial is based; (c) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation why such material or such information is necessary; (d) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and (e) the time limits for requesting a review under subsection (3) and for review under subsection (4) hereof.

(3) Request for Review.

Within 60 days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Bank review the determination of the Bank. Such request must be addressed to the general counsel of the Bank, at its then principal place of business. The Claimant or his or her duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Bank. If the Claimant does not request a review of the Bank’s determination within such 60 day period, he or she shall be barred and estopped from challenging the Bank’s determination.

(4) Review of Decision.

Within 60 days after the general counsel’s receipt of a request for review, he or she will review the Bank’s determination. After considering all materials presented by the Claimant, the general counsel will render a written opinion, written in a manner calculated to be understood by the Claimant, setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Agreement on which the decision is based. If special circumstances require that the 60 day time period be extended, the Secretary will so notify the Claimant and will render the decision as soon as possible, but no later than 120 days after receipt of the request for review.

9. Amendment . This Agreement may not be amended, altered or modified, except by a written instrument signed by the parties hereto, or their respective successors or assigns, and may not be otherwise terminated except as provided herein.

10. Binding Effect . This Agreement shall be binding upon and inure to the benefit of the Bank and its successors and assigns, and the Employee for the benefit of his beneficiary or beneficiaries.

11. Notices . Any notice, consent or demand required or permitted to be given under the provisions of this Agreement shall be in writing, and shall be signed by the party giving or making the same. If such notice, consent or demand is mailed to a party hereto, it shall be sent by United States certified mail, postage prepaid, addressed to such party’s last known address as shown on the records of the Bank. The date of such mailing shall be deemed the date of notice, consent or demand.

12. Governing Law . This Agreement, and the rights of the parties hereunder, shall be governed by and construed in accordance with the laws of the United States, to the extent applicable, and otherwise by the laws of the State of New York applicable to contracts entered into and performed wholly within its borders.

Exhibit A

Year of Death	Employee’s Interest Under Section 1

2017-2018	$	3,000,000

2019-2020	$	2,225,000

2021-2022	$	1,375,000

2023 and thereafter	$	500,000

IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in duplicate, as of the day and year first above written.

	NBT Bancorp Inc.

	By:	/s/ Martin A. Dietrich

Title:

Chairman

	NBT Bank, N.A.

	By:	/s/ Martin A. Dietrich

Title:

Chairman

	EXECUTIVE

	By:	/s/ John H. Watt, Jr.

Title:

President and Chief Executive Officer

DELAWARE		16-1268674
(State of Incorporation)		(I.R.S. Employer Identification No.)

Item 1	Financial Statements

	Consolidated Balance Sheets at March 31, 2017 and December 31, 2016	3

	Consolidated Statements of Income for the three month periods ended March 31, 2017 and 2016	4

	Consolidated Statements of Comprehensive Income for the three month periods ended March 31, 2017 and 2016	5

	Consolidated Statements of Stockholders’ Equity for the three month periods ended March 31, 2017 and 2016	6

	Consolidated Statements of Cash Flows for the three month periods ended March 31, 2017 and 2016	7

	Notes to Unaudited Interim Consolidated Financial Statements	9

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38

Item 3	Quantitative and Qualitative Disclosures about Market Risk	50

Item 4	Controls and Procedures	50

PART II	OTHER INFORMATION

Item 1	Legal Proceedings	51
Item 1A	Risk Factors	51
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3	Defaults Upon Senior Securities	51
Item 4	Mine Safety Disclosures	51
Item 5	Other Information	51
Item 6	Exhibits	52

SIGNATURES		53

INDEX TO EXHIBITS		54

NBT Bancorp Inc. and Subsidiaries
Consolidated Balance Sheets (unaudited)
	March 31,			December 31,
(In thousands, except share and per share data)	2017			2016
Assets
Cash and due from banks	$	137,308		$	147,789
Short-term interest bearing accounts		4,588			1,392
Securities available for sale, at fair value		1,367,574			1,338,290
Securities held to maturity (fair value $513,654 and $525,050, respectively)		515,793			527,948
Trading securities		10,044			9,259
Federal Reserve and Federal Home Loan Bank stock		42,577			47,033
Loans		6,272,303			6,198,057
Less allowance for loan losses		65,700			65,200
Net loans		6,206,603			6,132,857
Premises and equipment, net		83,144			84,187
Goodwill		265,439			265,439
Intangible assets, net		14,848			15,815
Bank owned life insurance		169,423			168,012
Other assets		128,144			129,247
Total assets	$	8,945,485		$	8,867,268

Liabilities
Demand (noninterest bearing)	$	2,205,419		$	2,195,845
Savings, negotiable order withdrawal and money market		4,153,552			3,905,432
Time		826,080			872,411
Total deposits		7,185,051			6,973,688
Short-term borrowings		540,243			681,703
Long-term debt		104,023			104,087
Junior subordinated debt		101,196			101,196
Other liabilities		88,133			93,278
Total liabilities		8,018,646			7,953,952

Stockholders’ equity
Preferred stock, $0.01 par value. Authorized 2,500,000 shares at March 31, 2017 and December 31, 2016		-			-
Common stock, $0.01 par value. Authorized 100,000,000 shares at March 31, 2017 and December 31, 2016; issued 49,651,493 at March 31, 2017 and December 31, 2016		497			497
Additional paid-in-capital		573,627			575,078
Retained earnings		511,925			501,761
Accumulated other comprehensive loss		(19,592	)		(21,520	)
Common stock in treasury, at cost, 6,209,092 and 6,393,743 shares at March 31, 2017 and December 31, 2016, respectively		(139,618	)		(142,500	)
Total stockholders’ equity		926,839			913,316
Total liabilities and stockholders’ equity	$	8,945,485		$	8,867,268

NBT Bancorp Inc. and Subsidiaries	Three Months Ended March 31,
Consolidated Statements of Income (unaudited)	2017		2016
(In thousands, except per share data)
Interest, fee, and dividend income
Interest and fees on loans	$	64,027	$	61,230
Securities available for sale		7,009		5,987
Securities held to maturity		2,781		2,288
Other		619		449
Total interest, fee, and dividend income		74,436		69,954
Interest expense
Deposits		3,474		3,597
Short-term borrowings		1,139		328
Long-term debt		606		833
Junior subordinated debt		726		619
Total interest expense		5,945		5,377
Net interest income		68,491		64,577
Provision for loan losses		7,379		6,098
Net interest income after provision for loan losses		61,112		58,479
Noninterest income
Insurance and other financial services revenue		6,770		6,946
Service charges on deposit accounts		3,977		3,939
ATM and debit card fees		4,950		4,583
Retirement plan administration fees		4,172		3,754
Trust		4,532		4,376
Bank owned life insurance		1,411		1,291
Net securities gains		-		29
Other		2,938		3,449
Total noninterest income		28,750		28,367
Noninterest expense
Salaries and employee benefits		33,587		32,441
Occupancy		6,170		5,491
Data processing and communications		4,198		4,050
Professional fees and outside services		3,032		3,231
Equipment		3,698		3,460
Office supplies and postage		1,608		1,547
FDIC expenses		1,178		1,258
Advertising		390		504
Amortization of intangible assets		967		1,096
Loan collection and other real estate owned		1,279		705
Other		5,175		4,441
Total noninterest expense		61,282		58,224
Income before income tax expense		28,580		28,622
Income tax expense		8,301		9,731
Net income	$	20,279	$	18,891
Earnings per share
Basic	$	0.47	$	0.44
Diluted		0.46		0.43

NBT Bancorp Inc. and Subsidiaries	Three Months Ended March 31,
Consolidated Statements of Comprehensive Income (unaudited)	2017		2016
(In thousands)
Net income	$	20,279	$	18,891
Other comprehensive income, net of tax:
Unrealized net holding gains arising during the period (pre-tax amounts of $ 836 and $13,211)		497		8,072
Reclassification adjustment for net gains (losses) related to securities available for sale included in net income (pre-tax amounts of $- and $29)		-		(19	)
Reclassification adjustment for an impairment write-down of equity security (pre-tax amounts of $1,312 and $-)		811		-
Unrealized gains on derivatives (cash flow hedges) (pre-tax amounts of $331 and $-)		204		-
Amortization of unrealized net gains related to the reclassification of available for sale investment securities to held to maturity (pre-tax amounts of $238 and $296)		147		181
Pension and other benefits:
Amortization of prior service cost and actuarial loss (pre-tax amounts of $435 and $512)		269		313
Total other comprehensive income		1,928		8,547
Comprehensive income	$	22,207	$	27,438

	Common stock		Additional paid-in-capital			Retained earnings			Accumulated other comprehensive income (loss)			Common stock in treasury			Total
(In thousands, except share and per share data)
Balance at December 31, 2015	$	497	$	576,726		$	462,232		$	(22,418	)	$	(135,033	)	$	882,004
Net income		-		-			18,891			-			-			18,891
Cash dividends - $0.22 per share		-		-			(9,473	)		-			-			(9,473	)
Purchase of 675,535 treasury shares		-		-			-			-			(17,193	)		(17,193	)
Net issuance of 106,674 shares to employee benefit plans and other stock plans, including tax benefit		-		(4,584	)		-			-			1,923			(2,661	)
Stock-based compensation		-		1,612			-			-			-			1,612
Other comprehensive income		-		-			-			8,547			-			8,547
Balance at March 31, 2016	$	497	$	573,754		$	471,650		$	(13,871	)	$	(150,303	)	$	881,727

Balance at December 31, 2016	$	497	$	575,078		$	501,761		$	(21,520	)	$	(142,500	)	$	913,316
Net income		-		-			20,279			-			-			20,279
Cash dividends - $0.23 per share		-		-			(10,020	)		-			-			(10,020	)
Net issuance of 184,651 shares to employee benefit plans and other stock plans, including tax benefit		-		(3,712	)		-			-			2,882			(830	)
Stock-based compensation		-		2,261			(95	)		-			-			2,166
Other comprehensive income		-		-			-			1,928			-			1,928
Balance at March 31, 2017	$	497	$	573,627		$	511,925		$	(19,592	)	$	(139,618	)	$	926,839

NBT Bancorp Inc. and Subsidiaries	Three Months Ended March 31,
Consolidated Statements of Cash Flows (unaudited)	2017			2016
(In thousands, except per share data)
Operating activities
Net income	$	20,279		$	18,891
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses		7,379			6,098
Depreciation and amortization of premises and equipment		2,249			2,244
Net accretion on securities		1,267			799
Amortization of intangible assets		967			1,096
Excess tax benefit on stock-based compensation		1,472			-
Stock-based compensation expense		2,166			1,612
Bank owned life insurance income		(1,411	)		(1,291	)
Trading security purchases		(1,277	)		(568	)
Losses on trading securities		491			40
Proceeds from sales of loans held for sale		24,896			22,098
Originations and purchases of loans held for sale		(27,622	)		(22,133	)
Net gains on sales of loans held for sale		(46	)		(49	)
Net security (gains)		-			(29	)
Net loss (gain) on sales of other real estate owned		157			(306	)
Impairment write-down		1,312			-
Net decrease in other assets		595			2,135
Net (decrease) in other liabilities		(5,145	)		(1,319	)
Net cash provided by operating activities		27,729			29,318
Investing activities
Securities available for sale:
Proceeds from maturities, calls, and principal paydowns		78,038			74,090
Proceeds from sales		1,000			-
Purchases		(110,330	)		(142,613	)
Securities held to maturity:
Proceeds from maturities, calls, and principal paydowns		19,914			15,591
Purchases		(5,943	)		(9,471	)
Other:
Net increase in loans		(82,299	)		(90,342	)
Proceeds from Federal Home Loan Bank stock redemption		56,521			33,886
Purchases of Federal Reserve and Federal Home Loan Bank stock		(52,065	)		(29,475	)
Proceeds from settlement of bank owned life insurance		-			1,457
Purchases of bank owned life insurance		-			(45,000	)
Purchases of premises and equipment, net		(1,269	)		(1,625	)
Proceeds from the sales of other real estate owned		2,430			3,208
Net cash used in investing activities		(94,003	)		(190,294	)
Financing activities
Net increase in deposits		211,363			300,199
Net decrease in short-term borrowings		(141,460	)		(94,613	)
Repayments of long-term debt		(64	)		(70	)
Proceeds from the issuance of shares to employee benefit plans and other stock plans		1,983			(7	)
Cash paid by employer for tax-withholding on stock issuance		(2,813	)		(2,654	)
Purchase of treasury stock		-			(17,193	)
Cash dividends		(10,020	)		(9,473	)
Net cash provided by financing activities		58,989			176,189
Net increase (decrease) in cash and cash equivalents		(7,285	)		15,213
Cash and cash equivalents at beginning of period		149,181			140,297
Cash and cash equivalents at end of period	$	141,896		$	155,510

Supplemental disclosure of cash flow information	Three Months Ended March 31,
Cash paid during the period for:	2017		2016
Interest	$	6,363	$	5,876
Income taxes paid		1,019		3,405
Noncash investing activities:
Loans transferred to other real estate owned	$	3,946	$	952

(In thousands)	Amortized cost		Unrealized gains		Unrealized losses		Estimated fair value
March 31, 2017
Federal agency	$	160,064	$	80	$	563	$	159,581
State & municipal		47,910		161		227		47,844
Mortgage-backed:
Government-sponsored enterprises		559,228		3,156		2,280		560,104
U.S. government agency securities		17,566		397		40		17,923
Collateralized mortgage obligations:
Government-sponsored enterprises		511,651		562		6,910		505,303
U.S. government agency securities		58,239		180		741		57,678
Other securities		13,537		5,767		163		19,141
Total securities AFS	$	1,368,195	$	10,303	$	10,924	$	1,367,574
December 31, 2016
Federal agency	$	175,135	$	78	$	805	$	174,408
State & municipal		47,053		153		480		46,726
Mortgage-backed:
Government-sponsored enterprises		513,814		3,345		2,492		514,667
U.S. government agency securities		14,955		411		189		15,177
Collateralized mortgage obligations:
Government-sponsored enterprises		513,431		532		7,688		506,275
U.S. government agency securities		60,822		184		708		60,298
Other securities		15,849		6,394		1,504		20,739
Total securities AFS	$	1,341,059	$	11,097	$	13,866	$	1,338,290

(In thousands)	Amortized cost		Unrealized gains		Unrealized losses		Estimated fair value
March 31, 2017
Mortgage-backed:
Government-sponsored enterprises	$	94,849	$	-	$	1,227	$	93,622
U.S. government agency securities		491		76		-		567
Collateralized mortgage obligations:
Government-sponsored enterprises		215,639		959		1,637		214,961
State & municipal		204,814		972		1,282		204,504
Total securities HTM	$	515,793	$	2,007	$	4,146	$	513,654
December 31, 2016
Mortgage-backed:
Government-sponsored enterprises	$	96,668	$	-	$	1,176	$	95,492
U.S. government agency securities		533		87		-		620
Collateralized mortgage obligations:
Government-sponsored enterprises		225,213		1,060		1,508		224,765
State & municipal		205,534		434		1,795		204,173
Total securities HTM	$	527,948	$	1,581	$	4,479	$	525,050

	Less than 12 months							12 months or longer							Total
Security Type:	Fair value		Unrealized losses			Number of positions		Fair value		Unrealized losses			Number of positions		Fair value		Unrealized losses			Number of positions

March 31, 2017
AFS Securities:
Federal agency	$	94,535	$	(563	)		9	$	-	$	-			-	$	94,535	$	(563	)		9
State & municipal		24,235		(200	)		37		1,528		(27	)		2		25,763		(227	)		39
Mortgage-backed		265,960		(2,307	)		46		974		(13	)		4		266,934		(2,320	)		50
Collateralized mortgage obligations		442,362		(7,651	)		57		-		-			-		442,362		(7,651	)		57
Other securities		1,983		(17	)		1		2,959		(146	)		1		4,942		(163	)		2
Total securities with unrealized losses	$	829,075	$	(10,738	)		150	$	5,461	$	(186	)		7	$	834,536	$	(10,924	)		157

March 31, 2017
HTM securities:
Mortgaged-backed	$	93,622	$	(1,227	)		5	$	-	$	-			-	$	93,622	$	(1,227	)		5
Collateralized mortgage obligations		103,287		(360	)		12		33,841		(1,277	)		4		137,128		(1,637	)		16
State & municipal		48,303		(1,282	)		75		-		-			-		48,303		(1,282	)		75
Total securities with unrealized losses	$	245,212	$	(2,869	)		92	$	33,841	$	(1,277	)		4	$	279,053	$	(4,146	)		96

December 31, 2016
AFS securities :
Federal agency	$	119,363	$	(805	)		10	$	-	$	-			-	$	119,363	$	(805	)		10
State & municipal		31,873		(478	)		55		483		(2	)		1		32,356		(480	)		56
Mortgage-backed		277,524		(2,668	)		49		985		(13	)		4		278,509		(2,681	)		53
Collateralized mortgage obligations		473,746		(8,396	)		57		-		-			-		473,746		(8,396	)		57
Other securities		-		-			-		4,363		(1,504	)		2		4,363		(1,504	)		2
Total securities with unrealized losses	$	902,506	$	(12,347	)		171	$	5,831	$	(1,519	)		7	$	908,337	$	(13,866	)		178

December 31, 2016
HTM securities:
Mortgage -backed	$	95,492	$	(1,176	)		5	$	-	$	-			-	$	95,492	$	(1,176	)		5
Collateralized mortgage obligations		108,587		(319	)		12		35,209		(1,189	)		4		143,796		(1,508	)		16
State & municipal		81,984		(1,795	)		155		-		-			-		81,984		(1,795	)		155
Total securities with unrealized losses	$	286,063	$	(3,290	)		172	$	35,209	$	(1,189	)		4	$	321,272	$	(4,479	)		176

Portfolio	Class
Commercial Loans	Commercial
	Commercial Real Estate
	Agricultural
	Agricultural Real Estate
	Business Banking
Consumer Loans	Indirect
	Home Equity
	Direct
Residential Real Estate Mortgages

(In thousands)	31-60 Days Past Due Accruing		61-90 Days Past Due Accruing		Greater Than 90 Days Past Due Accruing		Total Past Due Accruing		Nonaccrual		Current		Recorded Total Loans
ORIGINATED
Commercial Loans:
Commercial	$	292	$	-	$	-	$	292	$	4,913	$	702,383	$	707,588
Commercial Real Estate		286		-		-		286		2,516		1,346,470		1,349,272
Agricultural		-		-		-		-		685		36,052		36,737
Agricultural Real Estate		-		-		-		-		1,771		30,314		32,085
Business Banking		2,965		428		-		3,393		4,766		463,074		471,233
Total Commercial Loans		3,543		428		-		3,971		14,651		2,578,293		2,596,915
Consumer Loans:
Indirect		15,407		3,552		2,222		21,181		2,135		1,575,393		1,598,709
Home Equity		2,635		614		58		3,307		2,926		447,902		454,135
Direct		246		71		103		420		63		61,414		61,897
Total Consumer Loans		18,288		4,237		2,383		24,908		5,124		2,084,709		2,114,741
Residential Real Estate Mortgages		2,444		322		-		2,766		8,585		1,071,170		1,082,521
Total Originated Loans	$	24,275	$	4,987	$	2,383	$	31,645	$	28,360	$	5,734,172	$	5,794,177

ACQUIRED
Commercial Loans:
Commercial	$	-	$	-	$	-	$	-	$	-	$	45,908	$	45,908
Commercial Real Estate		-		-		-		-		889		132,611		133,500
Business Banking		441		-		-		441		800		47,372		48,613
Total Commercial Loans		441		-		-		441		1,689		225,891		228,021
Consumer Loans:
Indirect		37		1		9		47		39		5,713		5,799
Home Equity		177		-		-		177		196		47,716		48,089
Direct		24		1		-		25		13		2,926		2,964
Total Consumer Loans		238		2		9		249		248		56,355		56,852
Residential Real Estate Mortgages		1,300		15		-		1,315		2,377		189,561		193,253
Total Acquired Loans	$	1,979	$	17	$	9	$	2,005	$	4,314	$	471,807	$	478,126
Total Loans	$	26,254	$	5,004	$	2,392	$	33,650	$	32,674	$	6,205,979	$	6,272,303

	For the three months ended
	March 31, 2017				March 31, 2016
(In thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
ORIGINATED
Commercial Loans:
Commercial	$	2,926	$	-	$	2,773	$	19
Commercial Real Estate		5,995		44		13,509		100
Agricultural		173		-		158		-
Agricultural Real Estate		1,580		11		616		11
Business Banking		650		2		978		6
Consumer Loans:
Indirect		5		-		11		-
Home Equity		8,431		110		8,003		121
Residential Real Estate Mortgages		5,611		39		6,121		67
Total Originated		25,371		206		32,169		324

ACQUIRED
Commercial Loans:
Commercial Real Estate		301		-		1,205		-
Total Acquired		301		-		1,205		-
Total Loans	$	25,672	$	206	$	33,374	$	324

ORIGINATED
Commercial Credit Exposure
By Internally Assigned Grade:	Commercial		Commercial Real Estate		Agricultural		Agricultural Real Estate		Total
Pass	$	658,916	$	1,286,478	$	34,144	$	27,349	$	2,006,887
Special Mention		12,987		31,208		310		2,558		47,063
Substandard		35,685		31,586		2,278		2,178		71,727
Doubtful		-		-		5		-		5
Total	$	707,588	$	1,349,272	$	36,737	$	32,085	$	2,125,682

Business Banking Credit Exposure
By Internally Assigned Grade:							Business Banking		Total
Non-classified							$	457,783	$	457,783
Classified								13,450		13,450
Total							$	471,233	$	471,233

Consumer Credit Exposure
By Payment Activity:			Indirect		Home Equity		Direct		Total
Performing			$	1,594,352	$	451,151	$	61,731	$	2,107,234
Nonperforming				4,357		2,984		166		7,507
Total			$	1,598,709	$	454,135	$	61,897	$	2,114,741

Residential Mortgage Credit Exposure
By Payment Activity:							Residential Mortgage		Total
Performing							$	1,073,936	$	1,073,936
Nonperforming								8,585		8,585
Total							$	1,082,521	$	1,082,521

(In thousands)	Commercial Loans			Consumer Loans			Residential Real Estate Mortgages			Unallocated			Total
Balance as of December 31, 2016	$	25,444		$	33,375		$	6,381		$	-		$	65,200
Charge-offs		(1,294	)		(6,502	)		(598	)		-			(8,394	)
Recoveries		447			1,035			33			-			1,515
Provision		130			6,861			388			-			7,379
Ending Balance as of March 31, 2017	$	24,727		$	34,769		$	6,204		$	-		$	65,700

Balance as of December 31, 2015	$	25,545		$	29,253		$	7,960		$	260		$	63,018
Charge-offs		(437	)		(5,413	)		(709	)		-			(6,559	)
Recoveries		765			974			22			-			1,761
Provision		(574	)		6,221			711			(260	)		6,098
Ending Balance as of March 31, 2016	$	25,299		$	31,035		$	7,984		$	-		$	64,318

(In thousands)	31-60 Days Past Due Accruing		61-90 Days Past Due Accruing		Greater Than 90 Days Past Due Accruing		Total Past Due Accruing		Nonaccrual		Current		Recorded Total Loans
ORIGINATED
Commercial Loans:
Commercial	$	33	$	5	$	-	$	38	$	2,964	$	650,568	$	653,570
Commercial Real Estate		-		-		-		-		7,935		1,343,854		1,351,789
Agricultural		-		-		-		-		730		37,186		37,916
Agricultural Real Estate		-		-		-		-		1,803		30,619		32,422
Business Banking		1,609		318		-		1,927		4,860		465,900		472,687
Total Commercial Loans		1,642		323		-		1,965		18,292		2,528,127		2,548,384
Consumer Loans:
Indirect		19,253		4,185		2,499		25,937		2,145		1,538,593		1,566,675
Home Equity		3,416		1,065		528		5,009		2,851		448,797		456,657
Direct		452		125		20		597		107		62,400		63,104
Total Consumer Loans		23,121		5,375		3,047		31,543		5,103		2,049,790		2,086,436
Residential Real Estate Mortgages		2,725		172		1,406		4,303		6,682		1,052,158		1,063,143
Total Originated Loans	$	27,488	$	5,870	$	4,453	$	37,811	$	30,077	$	5,630,075	$	5,697,963

ACQUIRED
Commercial Loans:
Commercial	$	-	$	-	$	-	$	-	$	-	$	49,447	$	49,447
Commercial Real Estate		-		-		-		-		1,891		135,398		137,289
Business Banking		236		-		-		236		804		49,842		50,882
Total Commercial Loans		236		-		-		236		2,695		234,687		237,618
Consumer Loans:
Indirect		100		5		-		105		47		8,541		8,693
Home Equity		254		53		30		337		237		50,553		51,127
Direct		30		2		-		32		20		3,133		3,185
Total Consumer Loans		384		60		30		474		304		62,227		63,005
Residential Real Estate Mortgages		609		28		327		964		2,636		195,871		199,471
Total Acquired Loans	$	1,229	$	88	$	357	$	1,674	$	5,635	$	492,785	$	500,094
Total Loans	$	28,717	$	5,958	$	4,810	$	39,485	$	35,712	$	6,122,860	$	6,198,057

	March 31, 2017						December 31, 2016
(In thousands)	Recorded Investment Balance (Book)		Unpaid Principal Balance (Legal)		Related Allowance		Recorded Investment Balance (Book)		Unpaid Principal Balance (Legal)		Related Allowance
ORIGINATED
With no related allowance recorded:
Commercial Loans:
Commercial	$	3,495	$	3,536			$	1,278	$	1,697
Commercial Real Estate		3,778		3,810				3,816		3,841
Agricultural		130		138				130		137
Agricultural Real Estate		1,520		1,660				1,434		1,567
Business Banking		645		724				655		728
Total Commercial Loans		9,568		9,868				7,313		7,970

Consumer Loans:
Indirect		5		15				5		16
Home Equity		8,374		9,272				8,483		9,429
Total Consumer Loans		8,379		9,287				8,488		9,445

Residential Real Estate Mortgages		6,194		7,028				6,111		6,906
Total		24,141		26,183				21,912		24,321

With an allowance recorded:
Commercial Loans:
Commercial Real Estate		1,081		1,081	$	335		5,553		5,736	$	735
Agricultural		37		37		37		49		49		37
Agricultural Real Estate		50		50		50		155		155		54
Total Commercial Loans		1,168		1,168		422		5,757		5,940		826

ACQUIRED
With an allowance recorded:
Commercial Loans:
Commercial Real Estate		-		-		-		1,205		1,321		691
Total Commercial Loans		-		-		-		1,205		1,321		691

Total:	$	25,309	$	27,351	$	422	$	28,874	$	31,582	$	1,517

	Three months ended March 31, 2017
	Number of contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Consumer
Home Equity		2	$	78	$	77
Total Consumer		2		78		77

Residential Real Estate		1		141		138

Total Troubled Debt Restructurings		3	$	219	$	215

	Three months ended March 31, 2016
	Number of contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Consumer
Home Equity		12	$	1,035	$	952
Total Consumer		12		1,035		952

Residential Real Estate		4		531		437

Total Troubled Debt Restructurings		16	$	1,566	$	1,389

	Pension Benefits						Other Benefits
(In thousands)	Three months ended March 31,						Three months ended March 31,
Components of net periodic cost (benefit):	2017			2016			2017		2016
Service cost	$	402		$	560		$	3	$	4
Interest cost		1,042			1,051			86		94
Expected return on plan assets		(1,985	)		(1,835	)		-		-
Net amortization		415			483			20		29
Total cost (benefit)	$	(126	)	$	259		$	109	$	127

Detail About Accumulated Other Comprehensive (Loss) Income Components	Amount reclassified from accumulated other comprehensive income (loss)						Affected line item in the consolidated statement of comprehensive income
	Three months ended
	March 31, 2017			March 31, 2016
Available for sale securities:
(Gains) on available for sale securities	$	-		$	(29	)	Net securities (gains) losses
Amortization of unrealized gains and losses related to securities transfer		238			296		Interest income
Impairment write-down of equity security		1,312			-		Other noninterest income
Income tax (expense)		(592	)		(105	)	Income tax (expense)
Net of tax	$	958		$	162

Pension and other benefits:
Amortization of net losses	$	435		$	515		Salaries and employee benefits
Amortization of prior service costs		-			(3	)	Salaries and employee benefits
Income tax (expense)		(166	)		(199	)	Income tax (expense)
Net of tax	$	269		$	313

Total reclassifications during the period, net of tax	$	1,227		$	475

	Level 1		Level 2		Level 3		Balance as of March 31, 2017
Assets:
AFS securities:
Federal agency	$	-	$	159,581	$	-	$	159,581
State & municipal		-		47,844		-		47,844
Mortgage-backed		-		578,027		-		578,027
Collateralized mortgage obligations		-		562,981		-		562,981
Other securities		10,923		8,218		-		19,141
Total AFS securities	$	10,923	$	1,356,651	$	-	$	1,367,574
Trading Securities		10,044		-		-		10,044
Interest Rate Swaps		-		3,971		-		3,971
Total	$	20,967	$	1,360,622	$	-	$	1,381,589

Liabilities:
Interest Rate Swaps	$	-	$	736	$	-	$	736
Total	$	-	$	736	$	-	$	736

Three months ended March 31,
	Increase (Decrease) 2017 over 2016
(In thousands)	Volume			Rate			Total
Short-term interest bearing accounts	$	1		$	25		$	26
Securities available for sale		816			215			1,031
Securities held to maturity		333			205			538
Investment in FRB and FHLB Banks		156			(12	)		144
Loans		2,879			(53	)		2,826
Total interest income		4,185			380			4,565

Money market deposit accounts		15			(33	)		(18	)
NOW deposit accounts		12			39			51
Savings deposits		9			(10	)		(1	)
Time deposits		(209	)		54			(155	)
Short-term borrowings		360			451			811
Junior subordinated debt		-			107			107
Long-term debt		(162	)		(65	)		(227	)
Total interest expense		25			543			568

Change in FTE net interest income	$	4,160		$	(163	)	$	3,997

	Three months ended
(Dollars in thousands)	March 31, 2017					March 31, 2016
Balance, beginning of period	$	65,200				$	63,018
Recoveries		1,515					1,761
Charge-offs		(8,394	)				(6,559	)
Net charge-offs		(6,879	)				(4,798	)
Provision for loan losses		7,379					6,098
Balance, end of period	$	65,700				$	64,318

Composition of Net Charge-offs
Commercial and agricultural	$	(847	)	12	%	$	328		(7	)%
Real estate mortgage		(565	)	8	%		(687	)	14	%
Consumer		(5,467	)	80	%		(4,439	)	93	%
Net charge-offs	$	(6,879	)	100	%	$	(4,798	)	100	%
Annualized net charge-offs to average loans		0.45	%				0.33	%

Capital Measurements	March 31, 2017			December 31, 2016
Tier 1 leverage ratio		9.08	%		9.11	%
Common equity tier 1 capital ratio		10.02	%		9.98	%
Tier 1 capital ratio		11.40	%		11.42	%
Total risk-based capital ratio		12.40	%		12.39	%
Cash dividends as a percentage of net income		49.41	%		50.00	%
Per common share:
Book value	$	21.34		$	21.11
Tangible book value (1)	$	14.88		$	14.61

Interest Rate Sensitivity Analysis
Change in interest rates	Percent change in
(in bp points)	net interest income
+200	(3.01%)
-100	(2.94%)

3.1	Restated Certificate of Incorporation of NBT Bancorp Inc. as amended through July 1, 2015 (filed as Exhibit 3.1 to Registrant’s Form 10-Q, filed on August 10, 2015, and incorporated herein by reference).

3.2	Amended and Restated Bylaws of NBT Bancorp Inc. effective January 23, 2017 (filed as Exhibit 3.1 to Registrant’s Form 8-K, filed on January 25, 2017, and incorporated herein by reference).

3.3	Certificate of Designation of the Series A Junior Participating Preferred Stock (filed as Exhibit A to Exhibit 4.1 of the Registrant’s Form 8-K, filed on November 18, 2004, and incorporated herein by reference).

4.1	Specimen common stock certificate for NBT’s Bancorp Inc. common stock (filed as Exhibit 4.1 to the Registrant’s Amendment No. 1 to Registration Statement on Form S-4, filed on December 27, 2005, and incorporated herein by reference).

10.1	Split-Dollar Agreement between NBT Bancorp Inc., NBT Bank, National Association and John H. Watt Jr. dated May 9, 2017.*

31.1	Certification by the Chief Executive Officer pursuant to Rules 13(a)-14(a)/15(d)-14(e) of the Securities and Exchange Act of 1934.

31.2	Certification by the Chief Financial Officer pursuant to Rules 13(a)-14(a)/15(d)-14(e) of the Securities and Exchange Act of 1934.

32.1	Certification by the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	XBRL Instance Document.

101.SCH	XBRL Taxonomy Extension Schema Document.

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	XBRL Taxonomy Extension Label Linkbase Document.

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

		NBT BANCORP INC.

	By:	/s/ Michael J. Chewens
		Michael J. Chewens, CPA
		Senior Executive Vice President
		Chief Financial Officer

By:	/s/ John H. Watt Jr.
	John H. Watt Jr.
	Chief Executive Officer

By:	/s/ Michael J. Chewens
	Michael J. Chewens
	Senior Executive Vice President and
	Chief Financial Officer